SmithREServices - Sacramento Commercial Real Estate & Investors Guide

01.21.2008

Hundred-bills Real estate fortunes are made by people who buy low and sell high. The question is, how do you know when it’s low?

You would have to be under a rock to miss that our economy is having challenges. Listen, anytime the government even thinks about giving the people money rather than collecting it in taxes, you know we are in trouble. So, what are you going to do about your chance to build wealth right now?

Real estate is a long term investment. Consequently, you have to get in at the right time and at the right price and in the right location. There are 3 primary factors to look at when considering if you should invest in a particular location, especially with commercial real estate.

1. What is the economy doing? In a bad economy, there are deals to be had. This is the classic time to buy low.

2. What is the population doing in the area that you want to buy? If it is going up and it is expected to continue that upward growth for at least 5 years, that’s a good sign. Why 5 years? Because you want the real estate to perform well while you own it AND when you want to sell it. If your timing is off, you may try to sell when a neighborhood is in transition or when it is a buyer’s market. Right now you want a buyer’s market because deals are available. However, when you sell, you want a seller’s market in order to maximize your return.

3. What is the employment like in the area of your acquisition? If jobs are strong, that bodes well for your asset. There are actually 2 job types to be aware of.

Basic jobs are jobs that feed the local economy and bring in revenue. For example, a manafacturing plant in California makes more than enough widgets for California. They ship the widgets all over the world so the revenue for the widgets comes back to California. As a result, that plant creates jobs and revenue.

Non-basic jobs are jobs that simply circulate the money that is already there. Retail, banking and services are all good examples of non-basic jobs.

You want to own real estate in an area than has a high percentage of basic jobs because that means that local economy is strong.

The time is right to buy commercial real estate. Yes, it may drop further but interest rates may rise and the sky may fall according to Chicken Little. So, when you find a piece of commercial real estate that meets your objectives, buy it.

The right real estate professional has all the tools you need to help you make the right decision and put you on the path to building wealth through real estate. Choose wisely because you work hard for your money!